Explaining DSB 10 Year MoM Rolling IRR Table

WiKi of the DSB 10 Year MoM Rolling IRR Returns, a sample entry into the table looks like as shown below,

Date

NAV

Units

Cumulative Units

RedemptionValue

Monthly SIP

10 Years XIRR

2-Jan-07

147.286

6.790

6955.93731

1,049,488.55

1000

40.68

Date: This Indicates the Day on which your previous 10 Year Monthly Contribution is Redeemed. So you have Paid 120 Months of installments until this date.

NAV: Is the Net Asset Value as on Date i.e 1st of every month or next working day

Units: At current NAV, what is the Units that you will be allotted for Rs 1000 contribution

Cumulative Units: What is the Cumulative Units that you are Holding. In Jan-2007, the cumulative units will be the total units accumulated till Dec-2006 + Units allotted in Jan-2007 minus the entry in Jan-1997. We want exactly 120 previous entries and sum of the same.

Redemption Value: Units accumulated for 120 months and NAV on the First day of the following month. Because the last installment has to stay invested for 30 days according to our Mathematical Model. So your investment of Rs 120,000 would have become Rs 1,049,488.55 at the end of 10 years

IRR: Internal rate of Return based on the Cash Flow is a Variant of Compound Interest Formula that you have learnt in primary school. Takes into account the day you have invested and calculates Compounded return until the day of redemption on that portion of investment and then the ultimate integration of all those partial sums over 120 month period. It Just Works Mystically. in the table above the investor would have earned a whopping 40.68%.